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The Australian building sector faces its toughest year in decades, with hundreds of contractors struggling to survive as weak residential housing and stiff competition force builders to price jobs below cost to win ­business.

Weak commercial property markets, delays in big mining projects, wet weather and funding issues are also crippling building companies, according to industry leaders who cannot see any sign of relief.

Shares in large listed building products companies are near record lows, with Boral yesterday downgrading earnings for the second time in three months and rivals CSR and Fletcher Building expected to follow.

Shares in CSR, which has one of the highest exposures to new residential starts, are trading at 25-year lows.

Companies exposed to the commercial sector are also hurting, particularly in New South Wales where three major construction firms have collapsed this year.

“I have travelled around the country in the last few weeks and without question there is a lot of pain out there. Competition is fierce. I was just in Perth and nowhere is immune,” said industry veteran Peter Kennedy, who retired as chairman of private construction giant Hansen Yuncken late last year.

“Contractors are pricing too low. They are desperate to keep the work going. It is one of the worst times I can see in my 40-odd years in the industry,” said Mr Kennedy, the national president of the Master Builders Association.

Boral yesterday blamed bad weather and delays to major construction projects and the early closure of one of its cement plants for its latest earnings downgrade.

The news sent its shares down 2 per cent to a 3½- year low of $3.13.

Geoff Reed, the founder of Sydney-based Reed Group whose construction division went into voluntary administration last week, said he expected more collapses in the second half.

“There are too many builders and not enough work,” Mr Reed said.

He said there had been no major contracts since the government’s stimulus package in 2009 to soak up demand for work.

“What that has meant is a price war between the builders that are trying to continue on and many of them must struggle because they are all pricing essentially below cost to try and grab a job.

“It is diabolical for the building industry,” Mr Reed said.

In the residential space, new housing activity has been declining since October 2010. Home starts in New South Wales plunged by 37.4 per cent in the March quarter to their lowest since the data series began in 1984. Home starts rose marginally in only two of eight states – Queensland and South Australia.

Builders said the housing starts did not reflect population levels and demographics and governments were not delivering on urban planning reforms. Affordability, weak consumer sentiment and lack of land were the main problems.

“Every time there is a land release, it is like seagulls at the beach fighting for a chip,” said Maurice Felizzi, chief executive of Clarendon Residential Homes, which operates in NSW and Queensland.

The only light for local building material groups are their businesses based in the United States, where some green shoots are evident, and in developing Asia.

Consumer confidence was also undermining the residential market, while mid-tier developers faced funding and financing issues.

“It is incredibly weak. Some of it is structural just in terms of timing and grants, but it is from every perspective you look at it, very weak,” JPMorgan analyst Jason Steed said.

“It is a matter of the rate of improvement, if you look at consumer sentiment that is driving that, that’s a challenge. I don’t see the prospect of consumer sentiment ticking up soon.”

Builders also said the housing market was not responding to recent interest rate cuts. RP Data-Rismark figures show residential property values fell 1.4 per cent for capital city homes in May.

CSR is tipping flat housing starts of 140,000 in the year to March 2013. The high Australian dollar has also hurt the company’s earnings.

Builders also warned the income coming in from new projects was not enough to pay the backlog of creditors, which would lead to more corporate collapses.

Mr Kennedy said the skills shortage due to the mining boom was creating problems for construction companies.

He also blamed lack of initiatives in the federal budget to help the industry while red tape and new burdens such as the carbon tax were hurting.

“It has been compounded by heaps of legislation being applied to the industry which is adding more costs at a time when we can least afford it,” Mr Kennedy said.